Will divergence between euro and non-euro stocks continue?

Hugh Cuthbert, manager of SVM's Continental Europe fund, asks whether there will be a level playing field between euro and non-euro currency plays now growth is returning to Europe.

It is not surprising to learn there has been a clear outperformance from the equity markets of European countries operating outside of the single currency mechanism since the financial crisis. While euro-dominanted countries fell into a deep recession, the likes of Switzerland and Sweden were able to outperform the broader European index if we take the market’s peak at the end of 2007 as our starting point (box 1 below). If we take the respective currency moves into account, the divergence is even more pronounced (box 2 below). Fears of a breakup of the currency union were largely ...